Whoever you are, thank you. Could you suggest any good books on the VC process? I'd like to be prepared if we decide to go that route.
http://www.amazon.com/Entrepreneurs-Guide-Business-Law/dp/03...
In general, I think too many young entrepreneurs give up too much equity too quickly because they fall for the "oh we're making the pie bigger so giving us a huge percentage is fine" fallacy.
There are so many things to take into account when taking VC money. Too many VC firms replace young CEOs quickly at which point the founders get heavily diluted. Also be careful of VCs that try to reserve too large of a pool for management they want to recruit.
Management team members recruited by your VC work for the VC, not for you, the CEO. When push comes to shove, they will side with the VC because they know the VC will find them another job if your start-up goes bust.
The golden rule of VCs is this: He who has the gold makes the rule.
- There is a special election you can make when you sell the company that allows you to sell the assets instead of the equity which is something you can get the acquirer to pay more for because they can get a stepped up basis at market value and then depreciate it to create tax savings.
I don't remember the exact research, but I believe subchapter S corporations that undertake the election sell for 10% more than companies that cannot or do not take the election with all other things being equal.